Bitcoin

The second point is that these open-source decentralized ledgers have network effects, and thus the largest and most robust one is the most valuable by far. If someone expects it to get completely disrupted at some point, then they might rationally avoid investing in it. If they instead expect that it’ll keep updating and remain in the lead with... See more

Bitcoin is the clearest example – BTC holders are willing to accept inflation as a pure expense with no expectation of future income rights. You could also easily imagine Bitcoin having a 1% inflation tail programmed from the start, and perhaps BTC holders would happily hold it. That would happen because BTC holders derive sufficient utility from... See more

When bitcoin is in a deep bear market, its market capitalization has historically dipped a bit below its on-chain cost basis. When bitcoin is near or below its cost basis, that has historically been an excellent buying opportunity, and in the past I’ve pounded the table on it when it reached those levels. There’s no guarantee it’ll reach those lows... See more

Historically, currencies like the USD acted as abstraction layers, allowing us to translate the value of apples, houses, and stocks into a single universal language. Tokenization obliterates this framework. It makes anything exchangeable for anything else. Imagine swapping loyalty points for a stake in a music NFT or trading your onchain... See more

“I was discussing bitcoin with an investor yesterday and he replied somewhat dismissively ‘It’s just like buying gold’. No, it’s like buying gold in 1000 B.C. 99% of the financial wealth has yet to address bitcoin. When they do, bitcoin is either going to be worth zero or [up orders of magnitude].”

The argument in favor of a BSR is similar to the US’s rationale for stockpiling the largest amount of gold vs any other nation-state; it allows the US to assert financial supremacy over every other nation in the digital and physical realms. If Bitcoin is the hardest money ever known, then the strongest government fiat currency is the one whose... See more

So far, this post has focused almost exclusively on tokens’ ability to capture value by generating income streams for their holders. They are productive capital assets. This may very well be sufficient to value most tokens in the long-run. Equity-like analysis will do the trick here. Think DCF and DDM.

However, valuing tokens based on cash flows... See more

It seems obvious that applications, not general-purpose networks, will capture the majority of cash flows generated in these systems over the long-run. This is already playing out. Apps have all of the leverage and pricing power with the end-customer. There’s still a big question though – how much MEV leakage will these apps leave around for the... See more